U.S. President Barack Obama says Washington will make sure Iran "pays a price" for a plot to assassinate the Saudi Ambassador to the United States.

Obama said during a news conference in Washington Thursday with visiting South Korean President Lee Myung-bak it was clear that individuals within the Iranian government were aware of the plot, calling it part of a pattern of "dangerous and reckless behavior."

He also said the U.S. will consider all options in responding to the plot and would start by applying the toughest possible sanctions to further isolate Tehran.

U.S. State Department spokeswoman Victoria Nuland confirmed Thursday that the U.S. and Iran have had "direct contact" about the alleged plot.

Iran has denied the allegations, with one Iranian official calling the scenario "absurd."

During a visit to Austria, Saudi Foreign Minister Prince Saud al-Faisal said Saudi Arabia is working on a "measured response." He also said his country would "not bow" to Iranian pressure and would hold Tehran accountable for any action taken against Saudi Arabia.

Both the U.S. and Iran have sent letters to the U.N. about the plot. The U.S. letter says the conspiracy was "conceived, sponsored and directed" by elements of the Iranian government. The Iranian letter expresses Tehran's "outrage" and strongly rejects what it calls "fabricated and baseless allegations."

British Foreign Secretary William Hague said Thursday the alleged plot was a "major escalation in Iran's sponsorship of terrorism." He said Britain will work with the U.S., the European Union and Saudi Arabia to agree on an international reaction.

Also, visiting South Korean President Lee Myung-bak told reporters at a news conference with Obama in Washington Thursday that he was deeply shocked to learn of the plot and condemns all forms of terrorism.

The U.S. Justice Department announced this week it had charged Manssor Arbabsiar, a naturalized U.S. citizen, and Gholam Shakuri, a member of an elite Iranian military unit, with conspiring to carry out a bomb attack on Saudi envoy Adel al-Jubeir.

U.S. officials say Arbabsiar unknowingly hired an informant of the U.S. Drug Enforcement Administration to carry out the plot, believing the informant had ties to Mexican drug cartels capable of killing the Saudi ambassador. They say Arbabsiar confessed to making a $100,000 down payment on the scheme with a price tag of $1.5 million.

Officials arrested Arbabsiar at New York's John F. Kennedy International Airport on September 29, but Shakuri is still at large.